21 March 2021

Jerome Smail, business journalist, presents the views of several industry luminaries on the topic of payroll’s practical role in workplace financial awareness

As professionals in the industry will know only too well, payroll isn’t just about…well, payroll anymore. Various elements of the reward piece, such as pensions and employee benefits, have found themselves increasingly within the remit of the function over the last decade. Now, with HR (human resources) becoming more involved in ensuring the wellbeing of workers in terms of finances as well as mental and physical health, how far should payroll departments go in providing services and guidance to improve employees’ financial awareness?

To find out, I asked the views of the following leading experts in the field:

Melissa Blissett, senior consultant, pay gap analytics and financial wellbeing, Barnett Waddingham

Vickie Graham DipM ACIPP ACIM, CIPP business development director

Karen Young, director of Hays Accountancy & Finance

Henry Tapper, chief executive officer of AgeWage.


Should payroll departments be a triage service to financial advice?

Melissa Blissett: While payroll has an insight into employee financial behaviour around pension contributions, for example, it may be a responsibility too far to take on the role of triaging of financial advice – especially without any knowledge of the employee’s wider financial position. An IFA (independent financial adviser) would never seek to advise without conducting a comprehensive fact find.

That said, there may be some best practice to be adopted, such as signposting to the organisation’s employee assistance programme (EAP) for those taking pay advances or loans. Financial help and guidance is often an EAP’s best kept secret – many employees don’t realise the support may extend beyond mental health support. The payroll team could also signpost to other reputable sources of support such as the government-backed Money and Pension Service (MaPS).

Vickie Graham: Within the CIPP’s 2020 Future of Payroll survey we asked members what skills they were planning on developing within the next two years to which 37% said financial awareness and understanding. This suggests that members recognise there is a shift towards payroll providing some basic financial awareness training to employees. It is important to recognise that this basic financial awareness is not financial advice, which is regulated. Payroll professionals can recognise how they can support employees by educating them about their pay, benefits and reward programmes, but also recognise when to signpost them to further financial advice.

Karen Young: There are regulations and qualifications required to give independent financial advice and, like HR or any other department, individuals in payroll would not normally be qualified to give financial advice or to make decisions on behalf of employees or to triage financial advice.

However, there is a difference between giving advice and giving information, and payroll professionals can definitely help with information. There is a responsibility from companies that offer employee benefits to give employees enough information about them in order that they can make an informed choice.

This is where payroll and HR can work together – for example, ensuring employees don’t fall below the minimum wage if benefits are made through salary sacrifice, helping to set up new benefits that are paid for through salary deduction, expertise on levels of applicable National Insurance, and explaining payslips, tax codes and levels of tax deductions.

Employees often need help to understand these types of issues, and payroll can be proactive in working with HR to help with clearly explaining them.

Henry Tapper: Financial advice is a minority sport – available to those with the means to pay for it – which usually means a six-figure sum. Triage would mean identifying a need and establishing the staff member has the means to pay. This is a big ask.

Instead of signposting financial advice, payroll could be signposting MaPS. The triage could be whether this is to Pensions Wise (when the staff member is over over 50), or whether the inquiry should be directed at the more general Pension Advisory Service or the Money Advice Service when help is needed on non-pension related matters – for instance, debt counselling.


...how far should payroll departments go in providing services and guidance to improve employees’ financial awareness?


Should payroll members be more involved in retirement planning activities for staff?

MB: When payroll is often the team that implements pension contributions, some may relish the opportunity to extend their role beyond a transactional function and become more engaged with the wider aspects of communication and action planning. While this may provide a deeper level of job satisfaction for some, others may feel stressed by the prospect of being out of their depth. Given the technical complexity of pensions, it would be unfair for employers to expect this additional involvement without providing further training. Ideally the payroll team should be included in the pensions governance committee, which comprises a number of specialisms – internal communications, benefits managers, finance and potentially an independent pension consultant.

VG: Since the introduction of automatic enrolment for pensions in 2012, payroll professionals have had an increased involvement in pensions. Payroll professionals should be encouraging employees to take an interest in their retirement planning, but again cannot provide advice in this area.

They can use their position, knowledge of employees and connections to research pension schemes that are aligned with their organisation’s culture. However, when it comes to advising employees where to invest their money, payroll professionals should signpost to financial advisors and not offer this advice themselves.

At the CIPP, for example, we offer a pension scheme with investment options for employees to manage through an online portal. As part of the service employees can choose to pay for advice on where to invest based on their retirement plans. This is something that payroll has organised as a service, but is not responsible for providing the advice.

KY: This is an area that requires knowledge of the impact of pension savings and the choices available to employees on retirement. Typically, this is done via pension specialists, the pension provider and the employee pension manager and benefits manager.

Where payroll can add expertise is, for example, on ensuring employees know when they no longer have to pay National Insurance, the impact on pay that might be had if they go part-time before fully retiring and how their tax codes might change. It is important that payroll is not forgotten, and it can add value in being involved in the discussions around retirement planning on the areas that impact payroll.

HT: Yes, as well as recommending MaPS, payroll can refer staff to the services offered by the pension provider or (if there is one) the employee benefit consultant commissioned by the employer.


How should an employer decide what aspects of financial awareness to offer/provide for employees?

MB: A first port of call for an employer looking at their financial benefits is to conduct a financial wellbeing survey of their employees. This can be revealing. I remember one management team being absolutely shocked, saying, “We pay them market average salaries, so we never expected evidence of such poor financial wellbeing”.

Our surveys have repeatedly found evidence of savings levels not extending much beyond a month’s income and employees struggling to cover day to day costs. In our most recent survey undertaken during the first lockdown we reported that 23% had to ask friends or family for financial help and 19% were planning to approach their employer.

Remember, financial support may not just be via benefits. This could be financial education or even changes to internal procedures such as how expenses are processed or sick pay policies.

VG: As with any aspect of a reward programme, employers should do some research and understand their employees to determine what type of support and financial awareness to provide. Once payroll has an understanding of its employees, it should also consider the culture of the organisation and provide financial awareness that fits with both employee need and organisation culture. For some organisations this may mean basic financial awareness training delivered to all employees, and for others it may lead to financial education and advice provided on a one-to-one basis.

KY: Overall, employers should seek feedback from their staff into what aspects of financial awareness and offerings they are looking for. This could range from loan support to savings products tied to a third-party provider. Many employers won’t be legally allowed to offer specific financial advice so it’s best to link up with a partner, such as SalaryFinance, to provide that.

HT: It does not make sense for employers to work out a financial awareness plan, but with the help of a good consultant, a staff survey can assess demand.


Is there a risk that ‘pay on demand’ can lead to increasing debt?

MB: This is a huge risk – it’s extremely difficult to get out of a debt spiral. A key point here is that if you choose to work with a third party offering pay in advance or loan consolidation, the employer should conduct thorough due diligence. This should include what flags are in place to identify employees regularly accessing support and how these employees are then communicated with. If the employer does not feel confident conducting this themselves, a financial wellbeing specialist who knows the market and the questions to ask can help.

VG: Pay on demand as a benefit has been slow to adoption in the UK, being more prominent in the gig economy and hospitality sectors. As a concept it allows for employees to access earned income once it has been earned and not wait for a traditional payday, which can support employees should they have an unexpected expense.

The CIPP’s 2020 Future of Payroll survey and report showed that just 3% of respondents have introduced pay on demand within their organisation, with an additional 4% stating that they planned to introduce this within the next twelve months.

When delving deeper, there is a concern amongst payroll professionals that pay on demand could lead to financial problems and increased debt if used continuously. This is a concern which can be mitigated through the introduction of financial awareness training alongside pay on demand.

The CIPP hosted an online roundtable on the topic of pay on demand that was attended by subject experts, and those working within the payroll sphere. Similar themes emerged during the discussion, where people confirmed that where they were operating a pay on demand scheme they advised that they had performed a lot of research and study into financial wellbeing and how funds drawn down prior to contractual pay day were being used, and if the use of the scheme actually left individuals in a negative financial position.

HT: There are risks of this happening, but equally risk that if money isn’t available mid-month, the consequences could be worse.


Should salaries in the payroll profession be reviewed if payroll workers take on these additional activities such as providing financial awareness?

MB: Just as we have seen chocolate bars reducing in size within the same packaging, many of us have experienced a similar loss in value in salary – where more has been expected for no increase in pay. The pandemic has questioned why key workers are often experiencing below average salaries. The question of how much we value people and their contributions and how this is recognised in the form of pay is a topical discussion point.

While employers struggling with the effects of the pandemic may be loath to increase pay, they could offer more to employees perhaps in terms of time within the working day to spend on financial arrangements – particularly where these relate to employment, such as getting on top of understanding and planning for retirement or submitting cash plan claims. This would benefit payroll as well as other employees.

VG: The role of the payroll professional is changing and will continue to change. With it, payroll professionals have a responsibility to highlight to their employer the value of the role that they perform within their organisation to ensure that their salary is reflective of that. The CIPP works with a number of recruitment providers to benchmark salaries in the profession and encourage our members to engage with salary benchmarking to understand their value.

KY: In the same way that if any profession were to take on additional workloads, or professionals adding responsibilities to their job description, a pay review should be undertaken.

It’s important to view how much of the role would be dedicated to additional activities and whether that involves upskilling for the individual or a pay rise and career progression.

HT: Yes, payroll should be encouraged to press for higher wages for taking on more responsibility without any agreement from the employer that this will result in proper reward. 

Featured in the April 2021 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.